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Krakouer made his senior football debut for North Mount Barker in 1974 at the age of 15, kicking five goals. In September 1974, Jim and a cousin were charged with rape, and despite claiming that the sex was consensual, they were convinced by their lawyer to plead guilty and sentenced to two years' imprisonment, with a six-month minimum.[1] They were incarcerated in a juvenile prison 300 kilometres from Mount Barker in Bunbury. Upon his release, Krakouer returned to Mount Barker and despite having missed a third of the football season, won the league's best and fairest award by 5 votes.[2] The following year, only three weeks after gaining his driver's licence, he crashed his car into a road worker and was found guilty of dangerous driving causing death and sentenced to 18 months' jail.[3] While in prison, this time near Mount Barker, he was once allowed to play football for North Mount Barker on day release, but this caused outrage in the Albany community.[4]

Krakouer moved to Perth to play for Claremont in the WAFL in 1977. At first he played in the junior Colts team, but by July the league team's poor form had prompted the club president Wal Maskiell to ask that Krakouer be given a game in the league team. He performed well and maintained his position in the side for the rest of the season. In 1978 his brother Phillip joined him at Claremont and they both had a successful season. Jim was named in the state squad and Phil scored more goals than any other debutant.[5] Jim made his interstate debut in 1979, a year before Phil. They played their first state game together in 1981, in an 87-point win over South Australia, with Jim and Gary Buckenara sharing the Simpson Medal as best players.

In October 1981, in Jim and Phil's last game for Claremont, they were part of Claremont's WAFL Premiership side, beating the 1980 premiers South Fremantle.

After being pursued by Geelong and North Melbourne, the Krakouer brothers signed with North Melbourne on a three-year contract worth a total of $750,000. The main reasons for choosing the Kangaroos over Geelong were due to West Australian football legend Barry Cable being the North Melbourne coach and the contract payments being guaranteed, rather than performance-based.[6]

In their second season in the VFL, Jim and Phil both kicked 44 goals and shared the leading goalkicker award at North Melbourne. Jim was awarded the Syd Barker Medal for club best and fairest in 1986 and topped the goal kicking again in 1986 and 1988. Phil was the leading goalkicker in 1985 and 1987.

The Krakouer brothers were praised for their highly skillful play and the manner in which they often passed to each other from almost any position. In one match report in 1986 they were referred to as the Pelé and Maradona of the VFL.[7]

In 1996 Krakouer was convicted and imprisoned for 16 years for his part in a drug trafficking scheme transporting amphetamines from Melbourne to Perth. Having served nine years of his sentence, he was released on work release in August 2004.[9][10]